SBI offers cheaper rates to old home loan customers

In a move that will bring cheer to home loan borrowers, State Bank of India has decided to allow all old borrowers to switch over to the new floating rates that are lower. The move is aimed at customer bonding and preventing them from migrating to other banks, SBI officials said.

The decision will help a third of the bank's 17 lakh home-loan customers in bringing down interest payments by as much as two percentage points. Conversely, it could bring down the tenure by a few years.

Borrowers who have taken loans linked to SBAR (State Bank Advance Rate or the prime lending rate) are paying as much as 2-3 percentage points more than existing floating rates that are linked to the base rate. SBI's base rate is currently at 10 per cent, while the SBAR is 14.75 per cent.

Besides, the bank has also reduced the spread it charges over the base rate for home loans. Because of this, new home loan rates would be much cheaper.

There is no restriction on the tenure or the amount of the loan for customers to switch over. The bank is charging a fee of 1 per cent of the outstanding amount to switch to the new rate, an official added.

The current floating rates are 10.5 per cent for loans up to Rs30 lakh, 10.75 per cent for loans between Rs30 and Rs75 lakh, and 11 per cent for loans above Rs75 lakh.